Lenovo to Buy Motorola Handset Division from Google for $2.9 Billion

In a move that has pretty much surprised everyone, Google has announced that they will be selling Motorola’s handset division to Lenovo, which effectively washes Google’s hands of Motorola while still keeping the patents. Google only acquired Motorola in 2012 for $12.5 billion, primarily for the company’s patents as they were seen by many to be a lackluster and faltering smartphone manufacturer. Since then, Google has sold off Motorola’s set top box division and today announced that they will be selling the handset division to Lenovo. The interesting part is that this comes hot on the heels of another Lenovo acquisition, namely their acquisition of IBM’s x86 server business last week. This puts Lenovo in the $5+ billion category in terms of acquisitions this year and it isn’t even the end of January yet. However, this will still come out as a net loss for Google if you consider the amount of good will that they’ve set aside as part of this deal, so once this deal closes I would expect there to be some sort of write-downs attributed to Google. Google’s stock [NASDAQ:GOOG] is actually up 2.63 in after hours trading, indicating investors are fairly satisfied with the announcement.

Remember, that Lenovo’s rise to prominence has come from their incredibly strong consumer PC business which they had originally bought from IBM back in 2005. As a result, of today’s acquisitions and last week’s acquisitions, the company has actually decided to split the company into four different organizational divisions to make it easier to run them separately. Right now, Motorola has a lot of buzz about them, mainly because of the attention that Google got for the Moto X, which I don’t believe sold very well. But more importantly, the Moto G, which has gotten praise from reviewers and analysts alike as a very fast device at a valuable price of $179.

Larry Page, Google’s acting CEO said about Motorola’s patents, "And on the intellectual property side, Motorola?s patents have helped create a level playing field, which is good news for all Android?s users and partners.

But the smartphone market is super competitive, and to thrive it helps to be all-in when it comes to making mobile devices. It?s why we believe that Motorola will be better served by Lenovo?which has a rapidly growing smartphone business and is the largest (and fastest-growing) PC manufacturer in the world. This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere."

What this means is that Google gets to keep the IP and license it to Lenovo, while Lenovo makes the devices and takes in the profit made from making and selling them. Furthermore, I believe that this announcement quashes any rumors that Google will abandon the Nexus line of smartphones because I suspect many people misread today’s announcement as an end to the Nexus line rather than the sale of the Motorola business. Such is with the rumor business and sometimes misunderstanding result in a slight miss in terms of what eventually ends up happening. Google further reiterated their commitments to hardware, although it remains to be seen what they will do with the Nexus line, especially with the Nexus 10 aging quite a bit. Some rumors, prior to today’s announcement claimed that Google was planning to end the Nexus line in favor of Google Play Edition (stock OS) devices, but that’s a bit hard to believe in the near future.

The good thing, though, is that Lenovo gets yet another business where they’ve struggled on their own and I believe that Lenovo’s business acumen will prove useful in the mobile sector as it did in the PC sector.